Fla. insurers to get lower safety grades: How many? Demotech mum

Ratings firm Demotech says guidance on 57 Florida-based property insurers is under review in the wake of 2016 storms and continuing water-claims problems, but officials declined to say Friday how many companies are likely to get lower financial safety grades in March.

Does Demotech expect mortgage lenders to accept insurance companies who get less than an A?

FPL storm headquarters in West Palm Beach tracked Hurricane Matthew.

“The short answer is I don’t know,” said Demotech president Joe Petrelli.

A conference call Friday failed to clear up whether ratings downgrades expected in March are likely to affect four Florida companies, or 10 to 15, or some other number.

There were hints that newer grades will amount to a B-plus, or B double prime, which Petrelli compared to “getting an 88 or 89 on a test.” It doesn’t mean they are failing, but might need to do a little better to get an A, he said.

Consumers can see the grades in effect now, along with ratings from other agencies and information about complaints, in The Palm Beach Post insurance guide. Click here or go to:

Ohio-based Demotech plays a key role in rating insurers — particularly smaller ones or those who do not have an A.M. Best rating — for the mortgage market. It remains to be seen if uncertainty hanging over 57 insurers will cast a pall over Florida domestics as a group and drive more consumers to state-run Citizens. Whatever else you can say about Citizens, it has a $7 billion-plus surplus, bigger than any domestic, and a 10 percent annual cap on rate increases.

Big national companies are writing little or no new business in South Florida, in most cases.

The Florida Property & Casualty Association, representing a number of state-based companies, said this in a statement: “Ratings agency Demotech recently issued a press release advising they are making changes in the way they evaluate home insurance companies in Florida. This reflects their view of the state’s property insurance market which is deteriorating because of claim fraud, assignment of benefits abuse, and one way attorney fees. The FPCA shares Demotech’s view and continues to call upon the legislature to do something about it.”

The Post insurance guides also includes Weiss Ratings, which represent a far wider variety in letter grades for financial safety, from A to D (and, in tough times, E).

Weiss, based in Palm Beach Gardens, says it takes a consumer-oriented approach and does not accept money from the companies it rates. Insurance industry officials often bristle at Weiss grades and say they don’t reflect the same financial access and insights that other agencies can provide.

Here is a statement from Weiss senior analyst Gavin Magor:

“Weiss Ratings has always taken a conservative approach to ratings. Our view is that through our modelling we are able to differentiate the strongest and the weakest insurers and consequently we use A through F grades for Weiss Safety Ratings. It is our opinion that not all insurers have the same financial strength, even if they meet state minimums for capitalization.

“When we complete our ratings process we include tests for unexpected but predictable events and only issue our highest ratings to those insurers that pass all of those tests. This allows us to confidently stand behind our ratings and state that we recommend consumers obtain policies from insurers rated B+ or higher whenever possible.

“There are fewer weak homeowners’ insurers based in Florida than there were a year ago. This is because, as time has gone by, there have been minimal severe weather events and the insurers are in a stronger financial position than they have been in previously.

“Ratings of insurers should not change after one or more claims events, unless there has been a devastating hurricane or another significant disaster. We at Weiss Ratings are confident in our ability to continue to accurately rate insurers even as weather events and business models may be affected by legislation or judicial review.”